Morning Report: 5 December 2017

December 5, 2017

GBP Sterling has once again had an eventful 24 hours, as Brexit negotiations hit yet another snag. The pound rallied powerfully throughout the first half of the day, with various reports indicating that UK Prime Minister Theresa May’s lunch with European Commission President Jean-Claude Juncker would result in the announcement of a provisional deal being struck. However, as the lunch dragged on in to its third hour, sterling’s progress stalled as markets awaited formal confirmation. Unfortunately, at the conclusion of the dinner it was announced that, despite progress, no deal had yet been struck. It later transpired that Theresa May’s partners in Government, the DUP in Northern Ireland, flatly rejected the proposal of “continued regulatory alignment” between Northern Ireland and the European Union, with DUP leader Arlene Foster stating that she was unwilling to tolerate “regulatory divergence” with the rest of the United Kingdom. For today, at 09:30 GMT the Services Purchasing Managers’ Index will be released.

EUR The euro had another uneventful day, only momentarily down against USD before closing more or less flat. The Sentix Ivnestor Confidence Index for the eurozone fell slightly to 31.0, nonetheless a high level relative to the last couple of years. Producer Prices rose 0.4% as expected in October. Services Purchasing Managers Indices will be released throughout the morning, followed by European Retail Sales and a Gross Domestic Product revision at 10:00 GMT.

USD EURUSD was relatively quiet yesterday, and the weighted USD index DXY was also basically flat on the day, as no new material information about the tax reform bill came to light. The only data release of note was monthly Factory Orders, which contracted 0.1% in October. Today at 13:30 GMT Trade Balance data for October will be released, followed by Services Purchasing Managers Indices from Markit and ISM at 14:45 and 15:00 respectively.

CAD The loonie was among the best performers against USD yesterday, as markets continued to digest Friday’s solid employment and growth data. Trade Balance data will be released today at 13:30 GMT, as anticipation builds for tomorrow rate decision from the Bank of Canada.

UK news

  • Reuters: After Brexit deal crumbles, May to speak to Northern Irish party. Prime Minister Theresa May and other British officials will speak to Northern Ireland’s Democratic Unionist Party (DUP) on Tuesday after a tentative deal on Brexit with the European Union over the border with Ireland was dashed at the last minute.
  • Guardian: The Hague says claims of war crimes by UK troops have ‘reasonable basis’. The chief prosecutor at the international criminal court in The Hague, Fatou Bensouda, has declared there is a “reasonable basis” to believe that UK soldiers committed war crimes against detainees during the Iraq conflict.

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